THE Singapore High Court has on Wednesday (Oct 23) ordered forex trader Leong Kai Rui to return S$4.7 million to investor Oan Chim Seng for breaching an investment agreement.
Additionally, he must pay back a 5.33 per cent annual interest on the amount.
Oan alleged in his civil suit that Leong made false representations to induce him into a S$5 million investment and subsequently violated the terms of their agreement, leading to his claim for the amount.
A key issue in Oan’s claim was the interpretation of Leong’s message in their agreement, in which Leong stated: “After 60 trading days, if there is any lapse of the fund, we will provide the ‘gapped’ fund accordingly.”
In a written judgement, Justice Kwek Mean Luck said he accepted Oan’s interpretation of the phrase regarding the “gapped” fund, rejecting Leong’s explanation.
Leong contended that “gapped” referred to his intention to continue trading with the remaining equity to recover the original amount. He stated that the term was intended to establish a mechanism for recovering these funds by trading with the available equity, which would ultimately benefit Oan.
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However, Oan argued that since Leong was entitled to 70 per cent of the profits without contributing capital, it would not have made sense for him to enter into the investment without some other form of benefit, which was the capital protection offered by Leong.
The judge found Oan’s argument more “credible and consistent” with the nature of their investment agreement.
“Oan’s claim is not based on Leong receiving the monies himself, but on Leong promising to provide capital guarantee in the event of losses from trading,” he said.
Investment agreement breach
Oan and Leong became acquainted through the former’s son-in-law, Jerrold Phang. In 2019, Leong shared some investment opportunities with Phang, leading to an arrangement for a meeting between Oan and Leong on Nov 8 that year to explore these options further.
Oan claims that during their meeting, Leong made several verbal representations about the investment and agreed to manage S$5 million of Oan’s funds under specific terms. Leong had presented himself as an experienced forex trader and assured Oan that he could be relied upon, which he did, given Leong’s experience in carrying out the trades.
They agreed that Oan would create a personal trading account, and Leong would advise him on the procedure for funding the trading account. Subsequently, Leong instructed someone to assist in opening Oan’s trading account, and a WhatsApp group named “Forex Trading [Account]: Oan” was set up by Phang, involving himself, Oan and Leong.
On Nov 9, 2019, Leong sent Phang a series of WhatsApp messages that Oan says provide evidence on the oral terms of their investment agreement. According to these terms, profits earned would be divided between Oan and Leong, with Oan receiving 30 per cent and Leong receiving 70 per cent of all profits.
On Nov 18, 2019, Oan transferred S$5 million to the account of global online broker Axicorp Limited, from which trades were conducted. Notably, Axicorp has been listed on the Monetary Authority of Singapore’s Investor Alert List since August 2020.
Following the transfer, Leong controlled Oan’s trading account and conducted all trades without Oan’s approval. Leong would trade first and then update Oan on the profits at the end of each month.
In the first six months, the account generated about S$3 million in profits, of which Leong took 70 per cent, or some S$2.1 million, and gave 5 per cent of that to Phang.
By August 2020, there was around S$3.5 million in the trading account and the court noted that it is possible that by November 2020, Leong had lost S$3.2million from trading.
He attributed these losses to a “market phenomenon”, stating that the “market just dropped”, but he did not inform Oan about these losses. Ultimately, only S$299,475.76 remained in Oan’s trading account.
On or about June 2021, Oan made a withdrawal request from the account, for the sum of S$5 million. He, however, received S$300,000 on Jun 11, 2021 and commenced the present suit to recover the remaining sum of S$4.7 million.
In his defence, Leong said Oan would easily be an accredited investor under the Securities and Futures Act (SFA) by virtue of the size of the Axicorp investment alone. Oan would therefore have the financial appetite to appreciate the risks associated with such trades.
However, the judge highlighted that the definition of an accredited investor under the SFA takes into account the size of an individual’s assets or income, and has no bearing on that individual’s trading experience or knowledge. Leong acknowledged this on the stand.
